Pathward Financial (NASDAQ:CASH) versus Financial Institutions (NASDAQ:FISI) Critical Analysis

Pathward Financial (NASDAQ:CASH) and Financial Institutions (NASDAQ:FISI) are both small-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their dividends, valuation, analyst recommendations, institutional ownership, profitability, risk and earnings.

Analyst Ratings

This is a summary of recent ratings and target prices for Pathward Financial and Financial Institutions, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Pathward Financial	0	1	1	0	2.50
Financial Institutions	0	2	0	0	2.00

Pathward Financial currently has a consensus price target of $71.00, indicating a potential upside of 6.32%. Financial Institutions has a consensus price target of $22.00, indicating a potential downside of 13.96%. Given Pathward Financial’s stronger consensus rating and higher possible upside, analysts plainly believe Pathward Financial is more favorable than Financial Institutions.

Dividends

Pathward Financial pays an annual dividend of $0.20 per share and has a dividend yield of 0.3%. Financial Institutions pays an annual dividend of $1.20 per share and has a dividend yield of 4.7%. Pathward Financial pays out 3.0% of its earnings in the form of a dividend. Financial Institutions pays out 47.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Financial Institutions has raised its dividend for 13 consecutive years. Financial Institutions is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

92.7% of Pathward Financial shares are held by institutional investors. Comparatively, 60.5% of Financial Institutions shares are held by institutional investors. 0.7% of Pathward Financial shares are held by insiders. Comparatively, 2.7% of Financial Institutions shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Pathward Financial and Financial Institutions’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Pathward Financial	22.10%	23.59%	2.24%
Financial Institutions	13.95%	12.06%	0.83%

Volatility and Risk

Pathward Financial has a beta of 0.68, meaning that its share price is 32% less volatile than the S&P 500. Comparatively, Financial Institutions has a beta of 0.89, meaning that its share price is 11% less volatile than the S&P 500.

Valuation and Earnings

This table compares Pathward Financial and Financial Institutions”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Pathward Financial	$715.33 million	2.33	$163.62 million	$6.66	10.03
Financial Institutions	$334.38 million	1.18	$50.26 million	$2.51	10.19

Pathward Financial has higher revenue and earnings than Financial Institutions. Pathward Financial is trading at a lower price-to-earnings ratio than Financial Institutions, indicating that it is currently the more affordable of the two stocks.

Summary

Pathward Financial beats Financial Institutions on 12 of the 17 factors compared between the two stocks.

About Pathward Financial

Pathward Financial, Inc. operates as the bank holding company for Pathward, National Association that provides various banking products and services in the United States. The company operates through three segments: Consumer, Commercial, and Corporate Services/Other. It offers demand deposit accounts, savings accounts, and money market savings accounts. The company also provides commercial finance product comprising term lending, asset-based lending, factoring, lease financing, insurance premium finance, government guaranteed lending, and other commercial finance products; consumer credit products; other consumer financing services; tax services, which includes short-term refund advance loans and short-term electronic return originator advance loans; and warehouse financing services. In addition, it issues prepaid cards; and offers payment solutions, such as acceptance, processing, and settlement of credit card and debit card payments. The company was formerly known as Meta Financial Group, Inc. and changed its name to Pathward Financial, Inc. in July 2022. Pathward Financial, Inc. was founded in 1954 and is based in Sioux Falls, South Dakota.

About Financial Institutions

Financial Institutions, Inc. operates as a holding company for the Five Star Bank, a chartered bank that provides banking and financial services to individuals, municipalities, and businesses in New York. The company provides checking and savings account programs, including money market accounts, certificates of deposit, sweep investments, and individual retirement and other qualified plan accounts, as well as NOW accounts. Its loan products include term loans and lines of credit; short and medium-term commercial loans for working capital, business expansion, and purchase of equipment; commercial business loans to the agricultural industry; commercial mortgage loans; one-to-four family residential mortgage loans, home improvement loans, closed-end home equity loans, and home equity lines of credit; and consumer loans, such as automobile, secured installment, and personal loans. The company offers personal insurance products, including automobile, homeowners, boat, recreational vehicle, landlord, and umbrella coverage; commercial insurance comprising property, liability, automobile, inland marine, workers compensation, bonds, crop, and umbrella insurance products; and financial services, such as life and disability insurance, medicare supplements, long-term care, annuities, mutual funds, and retirement programs. In addition, it offers customized investment advisory, wealth management, investment consulting, and retirement plan services, as well as operates a real estate investment trust that holds residential mortgages and commercial real estate loans. Financial Institutions, Inc. was founded in 1817 and is headquartered in Warsaw, New York.